Extension of Time Claim Procedures and Assessment

EXTENSION OF TIME CLAIM PROCEDURES AND ASSESSMENT David Fabian and Ian Briggs Minter Ellison There are a number of areas of change to the extension of time claim provisions: EXTENSION OF TIME - QUALIFYING CAUSES OF DELAY Clause 35.5 of AS4300 contained quite complicated references to the types of delays that would entitle contractors to claim extensions of time. These lengthy provisions have been replaced with a statement that the contractor will be entitled to claim an extension of time if (inter alia) the contractor 'is or will be delayed in reaching practical completion by a qualifying cause of delay' (Clause 34.3). 'Qualifying cause of delay' is widely defined to be anything other than a breach or omission by the contractor, or industrial conditions/inclement weather occurring after the Date for Practical Completion. EXTENSION OF TIME CLAIM -TIME BAR Under Clause 34.3, the contractor is only entitled to extension of time claims if it submits a written claim for an extension of time 'within 28 days of the time when the contractor should reasonably have become aware of that causation occurring'. AS4300 contained a similar time bar, with the contractor being obliged to give a notice within 28 days 'after the delay occurs'. Although the new standard avoids the difficulties with establishing when the delay 'occurs' it is not clear whether difficulties will now arise as to when the 'causation' occurs, and there is risk of delay occurring to more than 28 days after causation. In any event, it is distinctly possible that these time requirements are not time bars. That possibility arises because of the wording of Clause 41.2. EXTENSIONS OF TIME - ASSESSMENT Assessment of claims is dealt with under Clause 34.4. According to the terms of that clause: • If both qualifying and nonqualifying causes of delay overlap, AS4902 obliges the superintendent to apportion delay to WUC according to whether it is non-qualifying or qualifying cause of delay. This is a change in risk which operates in favour of the contractor, as it leaves open the possibility of the contractor being granted an extension of time even if it was also delaying the works to some extent. This concept replaces the concept of 'concurrency' (Clause 35.5) provisions of AS4300 and AS2124, which have been notoriously difficult to apply. However it remains to be seen whether the new 'apportionment' approach is any easier to administer. • It is the committee's intention that the contractor still 'owns the float' although the relevant clause is not ideal and may give rise to differing interpretations. • If the superintendent does not respond to an extension of time claim within 28 days of receiving it, then the extension of time is deemed to be granted as an assessment and direction (Clause 34.5). To challenge the claim, the principal will be forced to go through the claim provisions (i.e. challenge a direction of the superintendent). This is likely to cause difficulties where the superintendent complains that the claim lacks sufficient detail to enable a proper assessment. EXTENSION OF TIME - LIQUIDATED DAMAGES AND DELAY DAMAGES Under AS4902 (Clause 34.7), the superintendent is obliged to certify liquidated damages as due and payable to the principal. This will create greater certainty as to the principal's ability to recover liquidated damages from the contractor. Delay costs were dealt with in Clause 36 of AS4300.They are dealt with in Clause 34.9 of AS4902, and AS4902 will lead to recovery of greater amounts than AS4300. Under AS4902,'delay damages' are payable for extensions of time arising from a 'compensable cause' (i.e. a matter within the control of the principal or superintendent). The 'damages' are to be assessed by the superintendent and (unlike AS2124 or AS4300) will include loss of profit and fixed overheads recovery. AUSTRALIAN CONSTRUCTION LAW NEWSLETTER #77 MAY/JUNE 2001 23

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Transcript of Extension of Time Claim Procedures and Assessment

Page 1: Extension of Time Claim Procedures and Assessment

EXTENSION OF TIMECLAIM PROCEDURESAND ASSESSMENTDavid Fabian and Ian Briggs

Minter Ellison

There are a number of areas ofchange to the extension of timeclaim provisions:

EXTENSION OF TIME- QUALIFYING CAUSESOF DELAYClause 35.5 of AS4300 containedquite complicated references tothe types of delays that wouldentitle contractors to claimextensions of time. These lengthyprovisions have been replacedwith a statement that thecontractor will be entitled to claiman extension of time if (inter alia)the contractor 'is or will bedelayed in reaching practicalcompletion by a qualifying causeof delay' (Clause 34.3). 'Qualifyingcause of delay' is widely defined tobe anything other than a breachor omission by the contractor, orindustrial conditions/inclementweather occurring after the Datefor Practical Completion.

EXTENSION OF TIME CLAIM-TIME BARUnder Clause 34.3, the contractoris only entitled to extension of timeclaims if it submits a written claimfor an extension of time 'within 28days of the time when thecontractor should reasonablyhave become aware of thatcausation occurring'.

AS4300 contained a similar timebar, with the contractor beingobliged to give a notice within 28days 'after the delay occurs'.Although the new standard avoidsthe difficulties with establishingwhen the delay 'occurs' it is notclear whether difficulties will nowarise as to when the 'causation'occurs, and there is risk of delay

occurring to more than 28 daysafter causation.

In any event, it is distinctlypossible that these timerequirements are not time bars.That possibility arises because ofthe wording of Clause 41.2.

EXTENSIONS OF TIME ASSESSMENTAssessment of claims is dealt withunder Clause 34.4. According tothe terms of that clause:

• If both qualifying and nonqualifying causes of delay overlap,AS4902 obliges thesuperintendent to apportion delayto WUC according to whether it isnon-qualifying or qualifying causeof delay. This is a change in riskwhich operates in favour of thecontractor, as it leaves open thepossibility of the contractor beinggranted an extension of time evenif it was also delaying the works tosome extent. This conceptreplaces the concept of'concurrency' (Clause 35.5)provisions of AS4300 and AS2124,which have been notoriouslydifficult to apply. However itremains to be seen whether thenew 'apportionment' approach isany easier to administer.

• It is the committee's intentionthat the contractor still 'owns thefloat' although the relevant clauseis not ideal and may give rise todiffering interpretations.

• If the superintendent does notrespond to an extension of timeclaim within 28 days of receiving it,then the extension of time isdeemed to be granted as anassessment and direction (Clause34.5). To challenge the claim, theprincipal will be forced to gothrough the claim provisions (i.e.challenge a direction of thesuperintendent). This is likely tocause difficulties where thesuperintendent complains thatthe claim lacks sufficient detail toenable a proper assessment.

EXTENSION OF TIME- LIQUIDATED DAMAGESAND DELAY DAMAGESUnder AS4902 (Clause 34.7), thesuperintendent is obliged tocertify liquidated damages as dueand payable to the principal. Thiswill create greater certainty as tothe principal's ability to recoverliquidated damages from thecontractor.

Delay costs were dealt with inClause 36 of AS4300.They aredealt with in Clause 34.9 ofAS4902, and AS4902 will lead torecovery of greater amounts thanAS4300. Under AS4902,'delaydamages' are payable forextensions of time arising from a'compensable cause' (i.e. a matterwithin the control of the principalor superintendent). The 'damages'are to be assessed by thesuperintendent and (unlikeAS2124 or AS4300) will includeloss of profit and fixed overheadsrecovery.

AUSTRALIAN CONSTRUCTION LAW NEWSLETTER #77 MAY/JUNE 2001 23